Fraud Casebook

Praise for Fraud Casebook Lessons from the Bad Side of Business

"I have known Mr. Wells for over twenty years. In my opinion, no one in the world knows more about fraud than he does."
-W. Steve Albrecht, Associate Dean, Marriott School of ManagementBrigham Young University, Provo, Utah

"This book covers the entire range of fraud that can be encountered in the workplace."
-Grant D. Ashley, Vice President for Corporate Security and SurveillanceHarrah's Entertainment Inc., Las Vegas, Nevada

"I had the pleasure of serving with Mr. Wells when both of us were volunteers for the American Institute of Certified Public Accountants. He knows as much as anyone about how to detect and deter fraud."
-James G. Castellano, Chairman, RubinBrown LLP, St. Louis, Missouri

"I have worked with Mr. Wells for ten years. His reputation is unsurpassed."
-John F. Morrow, Vice President, The New FinanceAmerican Institute of Certified Public Accountants, New York, New York

"Fraud Casebook is a terrific work. I highly recommend it."
-Sherron S. Watkins, a Time magazine "Person of the Year," Houston, Texas

"No one has done more for fraud prevention and detection than Mr. Wells and the Association of Certified Fraud Examiners. Their guidance and training proved invaluable to my staff and me in uncovering the WorldCom fraud."
-Cynthia Cooper, a Time magazine "Person of the Year," Clinton, Mississippi

Preface

PART 1 Asset Misappropriation 1

CHAPTER 1 High Art, Low Value: How a Connoisseur Became a Convict 3
by Ellen A. Fischer

CHAPTER 2 The Ambitious Payroll Manager 16
by John Tonsick

CHAPTER 3 The Insider 25
by Craig R. Sinnamon

CHAPTER 4 Aloha, Hawaii! 36
by Dominic A. D’Orazio

CHAPTER 5 What About Pete? 44
by Michael Goldman

CHAPTER 6 Check, Please 54
by Peter Parillo

CHAPTER 7 The MoJo Skim Twins 61
by John F. Kronick

CHAPTER 8 The Mole 71
by Manuel Pereira

CHAPTER 9 Her Passion for Fashion 79
by Bethmara Kessler

CHAPTER 10 An Unaffordable Complex 91
by Jeffrey D. Barsky

CHAPTER 11 A Taxing Problem 100
by Andrew H. Kautz

CHAPTER 12 Phantom Links In The Supply Chain 108
by Christopher J. Kelly

CHAPTER 13 The Trusting Business Owner 117
by David H. Glusman

CHAPTER 14 The $13 Million Man 126
by John Francolla

CHAPTER 15 They Didnt Know Jack 137
by Janet M. McHard

CHAPTER 16 The Skim Sisters 145
by Adam K. Bowen

CHAPTER 17 No Such Thing as a Free Lunch 156
by Suzanne Coggins

CHAPTER 18 The Dirty Custodian 164
by Paul J. Harvey

CHAPTER 19 The Video Game 172
by Carlos L. Holt

CHAPTER 20 Bet Your Life on It 183
by Howard B. Grobstein and Joshua R. Teeple

CHAPTER 21 When Petty Cash Isn’t Petty 195
by Karen Frey

CHAPTER 22 Where Did My Money Go?203
by Robert Barr

CHAPTER 23 Three Strikes and You’re Out! 212
by Mary Best

CHAPTER 24 Country Club Fraud — What a Steal! 222
by John Boekweg

CHAPTER 25 Where in the World Is Dina Sanchez? 233
by Briana J. Paciorek

CHAPTER 26 School of Fraud 242
by Nessan Ronan

CHAPTER 27 Price Check on Register One 251
by Dwight Taylor

CHAPTER 28 The Sky Is the Limit 260
by Brian E. Browning

CHAPTER 29 Supplemental Income 268
by James E. Whitaker

CHAPTER 30 An Innocent Perpetrator 276
by Howard C. Sparks

CHAPTER 31 Dr. Amy 285
by Stephen A. Pedneault

CHAPTER 32 Patriotic Game 295
by James Lee

CHAPTER 33 Would You Like the Special Poutine, If You Know What I Mean? 305
by Richard Elliott

CHAPTER 34 Three-Ring Circus: An Exposé of a Corporate Commission Embezzlement 316
by David A. Schneider

CHAPTER 35 One Bad Turn Deserves Another 327
by Forrest Bowman Jr. and Charles F. G. Kuyk III

CHAPTER 36 Dialing for Dollars 337
by Ian Henderson

CHAPTER 37 Wake-Up Call 343
by Michael Speight

CHAPTER 38 The Dental Queen 351
by Kenneth J. Wilson

CHAPTER 39 Shirley A. Little Wouldn’t Hurt! 358
by A. T. “Chief” Schwyzer

CHAPTER 40 Just When You Thought It Was Safe 368
by Frank D. Moran Jr.

CHAPTER 41 How Many Ways Can I Defraud You? 378
by David Clements

PART 2 Corruption Schemes 389

CHAPTER 42 A Contract of Convenience 391
by Robert B. Walsh Jr.

CHAPTER 43 Corruption by Seduction 404
by Douglas M. Watson

CHAPTER 44 “Big Easy” Business 418
by Patrick W. Malik and Jeffrey R. Sebree

CHAPTER 45 Unlucky 13 425
by Graham J. Thomson

CHAPTER 46 It ’s 11 p.m. Do You Know What Your IT Director Is Up To? 434
by John Kula

CHAPTER 47 These Weights Didn’t Measure Up! 444
by Joseph R. Dervaes

CHAPTER 48 Swimming with the Sharks 455
by Pedro Fabiano

CHAPTER 49A New York State of Fraud 466
by Martin T. Biegelman

CHAPTER 50 Information Superhighway 477
by Barry Davidow

PART 3 Financial Statement Fraud Schemes 491

CHAPTER 51 Banking on Fraud 493
by Jason Lee

CHAPTER 52 Just a Matter of Time 502
by Margaret Smith

CHAPTER 53 Bury Me Not in Guyandotte 510
by John W. Burdiss

CHAPTER 54 The Woolly Mammoth Eats Its Prey 519
by Paul Pocalyko and Charles N. Persing

CHAPTER 55 Double Damage 527
by Matthias K. Kopetzky

CHAPTER 56 How to Steal a Million Dollars Without Taking the Cash 536
by Richard A. Riley

PART 4 Other Fraud Schemes 547

CHAPTER 57 This Land Is Your Land, This Land Is My Land 549
by Andrew Pappas

CHAPTER 58 Paradise Lost 560
by Pierre E. Lautischer

CHAPTER 59 BODIES FOR RENT 568
by Rebecca S. Busch

CHAPTER 60 The Million-Dollar Breach of Trust 577
by Holly Frook Graham

CHAPTER 61 Troubled Water 587
by Dimiter Petrov Dinev

CHAPTER 62 Con Artists Gone Wild 596
by Heinz Ickert

Index 607

"Don’t just read this book. Read it and then look at your organization and evaluate your company's risks. Implement the lessons learned and the recommendations to prevent future occurrences so that you won't have to go through what I and the other people in this book experienced." (Strategic Finance, August 2008)

JOSEPH T. WELLS, CPA, CFE, is the founder and Chairman of the Association of Certified Fraud Examiners (ACFE) and a former adjunct professor of fraud examination at the University of Texas at Austin. He writes, researches, and lectures to business and professional groups on fraud-related issues and is frequently quoted in the media. He has won top writing awards from both Internal Auditor and the Journal of Accounting magazines, and he is a winner of the Innovation in Accounting Education Award presented by the American Accounting Association. For his landmark research in fraud detection and deterrence, Mr. Wells has been inducted into the American Institute of Certified Public Accountants' Business and Industry Hall of Fame and named to Accounting Today's list of top 100 most influential people for the last nine years in a row.

FRAUD CASEBOOKLessons from the Bad Side of Business

Fraud is a serious problem that goes beyond monetary losses. It costs jobs, corporate reputations, and individual dignity. Fraud Casebook: Lessons from the Bad Side of Business is the most comprehensive book ever compiled on fraud case studies, presenting the collected insights of some of the most experienced fraud examiners around the world. With revealing case studies handpicked and edited by Joseph T. Wells, the founder and Chairman of the Association of Certified Fraud Examiners (ACFE^SM)—the world's leading anti-fraud organization—this collection sheds light into the dark corners of government and commerce through professional investigations.

Organized around the various categories of fraud, the cases in this exceptional casebook explore three broad categories of fraud as well as their various sub-schemes: asset misappropriations, corruption, and fraudulent financial statements. Each case provides an informative and entertaining look into the complex social factors behind fraudulent behavior. The observations of each fraud examiner, drawn from years of practical experience, provide readers with invaluable perspectives, many of which have never before been conveyed publicly. Some of the sixty-two cases in Fraud Casebook include:

• Swimming with the Sharks, Pedro Fabiano
• Con Artists Gone Wild, Heinz Ickert
• Bodies for Rent, Rebecca Busch
• Information Superhighway, Barry Davidow
• Dialing for Dollars, Ian Henderson
• The $13 Million Man, John Francolla
• Her Passion for Fashion, Bethmara Kessler

Fraud Casebook: Lessons from the Bad Side of Business not only provides an insider look at fraud, it serves to educate readers to hopefully avert some of the mistakes made in the past. It illuminates the combination of timing, teamwork, and vision necessary to understand fraud and prevent it from happening in the first place. Finally, it challenges senior managers to better use their corporate resources to become much smarter about fraud, or risk becoming its victims.